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By Daria Sito-Sucic

SARAJEVO (Reuters) - Bosnia's chief prosecutor was suspended from office on Wednesday, a move he dismissed as a plot to derail a sensitive investigation he was conducting into an illegal referendum in the autonomous Bosnian Serb region.

The country's judicial council said Goran Salihovic would be suspended while it looked into allegations he had obstructed inquiries and interfered with judges and prosecutors' work, without giving details on which work had been obstructed.

Salihovic denied any wrong-doing and said the charges against him had been made up.

"I dismiss all allegations and nothing from that report is correct, all is fabricated. The reason for the report is that I opened an investigation against (Bosnian Serb leader) Milorad Dodik."

The suspension came days after Salihovic summoned Dodik to answer questions on the leader's calling of an unauthorized referendum on whether the Serb region should celebrate a "Statehood Day" on Jan. 9.

Many Bosnians believe Dodik called the plebiscite to boost his popularity before elections, and also to test the ground for a possible vote on secession from Bosnia - an uneasy multi-ethnic federation of Serbs, Croats and Muslim Bosniaks that was pieced together in 1995 to end an ethnic war.

The judicial council said it had appointed an acting chief prosecutor to carry on his work, but declined to comment further on Salihovic's suspension, or his reaction. It had earlier said its investigation into him was based on media reports of unprofessional conduct by Salihovic.

CHALLENGES

The impasse highlights the challenges of governing the unwieldy, poor country, composed of a Bosniak-Croat federation and the Serb Republic, both nominally subordinate to a central government with limited powers based in the capital Sarajevo.

Secession by the Serb Republic would take away nearly half Bosnia's 3.5 million people and deal a possibly fatal blow to the EU's ambition of fostering peace in the Western Balkans by ushering the seven Yugoslav successor states towards the bloc.

Western powers say they can do little to rein in Dodik as he tests the limits of his autonomy within Bosnia, but have said secession moves would cross a "red line" and force them to use residual emergency veto powers.

Russia, a traditional ally of the Bosnian Serbs, warned the West on Wednesday against using its veto powers, saying they did not believe Dodik was threatening Bosnia's territorial integrity.

It would be "categorically inadmissible" for the European Union's High Representative to use his emergency powers in relation to the referendum, said Maria Zakharova, spokeswoman for the Russian foreign ministry.

(Reporting by Daria Sito-Sucic in Sarajevo and Alexander Winning in Moscow; Editing by Thomas Escritt)